Providing Strategic Due Diligence In Retail
An Expert Assessment Of Demerger Proposals
What was the challenge?
The holding company for a number of well-known international brands were heavily involved in the day to day operations of the independent businesses. Each brand traded independently but shared non-core services such as IT, distribution and property. In order to reduce costs and maximise the enterprise value, the decision had been made to demerge the businesses into standalone entities. We were asked to provide strategic retail expertise to help establish the viability of the proposed demerger approach and to asses any associated risks.
What was the approach?
The study examined a broad array of financial and operational documentation complemented by observations and interviews with senior leadership in the group and brand management teams. We looked at the essential capabilities required for each brand and how these capabilities would be supported under the new proposals. We also examined the extent to which the management capability would be enhanced or diluted as a result of the change and the extent to which other strategic options had been considered. The team then reviewed the business plan for each brand and considered these in the context of the retail market conditions.
This rigorous review was completed to very tight timelines and the team were able to present a comprehensive and considered assessment supported by fact-based evidence. The recommendations that were made provided clear actions and guidance for the Group Board to take forward.
How did we help?
Our recommendations provided a timely challenge to the proposals that had been set out. It became clear that although the demerger proposals would benefit the brands by taking out costs and providing autonomy for the management teams, the brand business plans were not sufficiently complete to assure the future, independent prosperity.
As a result of this work the Group chose to take a longer-term view and chose to only demerge the most progressive brand. Group management control was reduced however the remaining brands continued to share back office services to ensure ongoing stability and profitability.